An Insufficiently Radical Solution To Occupational Licensing

It’s something of a surprise to find Tyler Cowen being insufficiently radical. But that is the conclusion we must come to here with his suggestion for occupational licensing. The analysis of the basic problem is entirely correct as is the observation that it is now a bipartisan issue. The question is then, and therefore, what the heck do we do about it?

Which is where not being radical enough comes in. The problem itself:

Criticism of the proliferation of occupational licensing is now bipartisan. Occupations such as dog walkers, interior designers, auctioneers and barbers do not need state licenses, and those legal restrictions serve mainly to raise prices for consumers and restrict supply, eventually limiting innovation and job creation, too.

But how to move forward? There are thousands of licenses, covering almost a third of U.S. workers, and licenses are proliferating at the city and county levels, too. Constitutional and antitrust and legal challenges to this trend are beneficial, but they bring only piecemeal victories and cannot undo the current morass of restrictions.

That’s all entirely true. So is the observation that there’s little point in trying to attack Hydra with a sword, head by head. As we crush guild protections for hairdressers in Tennessee then 15 other states will have instituted them for barbers. It’s just not the way to deal with the agreed problem. But then this isn’t the solution either:

My radical proposal is therefore for the federal government to pre-empt as much occupational licensing as is possible. That’s right, these functions would be taken away from the state and local governments.

Unfortunately, I don’t expect the federal bureaucracy to usher in the reign of Milton Friedman’s Chicago School economics. But the federal regulatory process would likely pay less heed to local special interests, and it would produce a more homogenized and less idiosyncratic body of regulatory law more geared toward the most important cases, such as medicine and child care. The federal government is less likely than many state and local governments to obsess over licensing rules for fortune tellers, florists and athletic trainers.

A federal approach to these regulations would also bring standardization and uniformity across state lines, making it easier to move from one part of the country to another, and helping restore the great American tradition of mobility. As it stands now, imagine yours is a military family and you are transferred every few years or so, and your spouse works in a profession that would require relicensing. What justification could there be for such a hardship and inconvenience?

Given the sort of toads who write Federal regulations we’ll be little better off. We’ll end up with barbers having to be competent in cuts for xe and flae before they’re allowed to trim nostril hairs for the elderly male (ahem).

No, what is needed is something truly radical. One law and one law only in Congress and we will, to fatally mix our Graeco-Roman mythological metaphors, be able to cut the Gordian Knot.

We insist upon common recognition of any, and every, states’ license.

The constitution has what is generally called the commerce clause. It’s Congress which will regulate trade between the States (and by implication, across the borders of the Republic). It’s also Congress alone which shall do so. This has been agreed to be a pretty wide set of powers. One alarming case insisted that a farmer couldn’t grow his own wheat, on his own land, for his own consumption. Because in the absence of his doing so he might partake in interstate commerce to buy wheat. Therefore, if there were restrictions upon planting, or prices, concerning supplies to interstate commerce they applied to his planting, on his land, for his consumption.

My, your, the labour of those 30% of Americans, obviously affect interstate commerce as do the licenses required. Great. So, Congress just says that all state licenses are recognised and valid in all States. This is what happens with marriage licenses, drivers’ licenses for at least some period of time. So why not occupational licenses?

The effect of this is that someone, assuredly, will capture the market in no worry licenses, as Delaware has with corporate formation. So, Tennessee (as an example we’ll not bother to check) insists upon 300 days of cosmetology training to be a barber, or braid hair? Great, but New Hampshire asks for $25 and in return you get a shiny certificate allowing you to be a barber, that certificate valid in Tennessee. All Congress has to do to achieve this is to insist upon mutual recognition of licenses across state lines and we’re done.

Why not? If we’re going to tackle this problem why not be properly radical about it? Kill the restrictions, kill both the value and costs of the restrictions, by having 50 issuing authorities. We’re really very certain indeed that one or other of them will end up as the low cost and low restriction issuer aren’t we? And most importantly, we drain the guilds of their ability to impose those restrictions upon market entry. For we’ve switched the Hydra. They now have to campaign for higher standards in all 50 states in order to gain anything at all. Other than the AMA who is going to bother to do that?

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Spike
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Spike

The New Hampshire legislature is considering a law requiring recognition of out-of-state licenses (for 90 days or so, enough time for the licensee to meet local requirements). This is not radical at all, as it doesn’t contemplate a marketplace in licensing requirements, least of all a marketplace where the consumer can waive any requirement. (Cue up politicians bemoaning the “race to the bottom.”) African refugees could braid black hair and buy a combi bus and run a jitney service. This would neatly kill two birds with one stone and assimilate them too. A bill to reduce the requirements of the… Read more »

Erik Bloodaxe
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Erik Bloodaxe

Yes, a very good idea, Tim. As a matter of fact, the EU tried something similar with Directive 2005/36 on the mutual recognition of professional qualifications. Unfortunately, it didn’t stop harassment, to wit arrest and detention, of British-qualified ski instructors in France. In fairness to the French courts, these guys have always won on appeal, once they’re heard in courts away from the immediate vicinity of the influence of the ESF guild. But the approach of serial arrests and drawn out criminal proceedings has deterred all but the most determined characters, who have insisted on their rights that are laid… Read more »

Tim Newman
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Hasn’t that changed now? There are quite a few British ski instructors in the French Alps now.

Tommydog
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Tommydog

I took my car into the dealer’s last week for service. I looked at a couple of new cars on the floor and then I noticed a wall full of salesmen’s licenses, all with photo ID. I was completely unaware that you had to have a license to be a car salesman.

Spike
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Spike

Imagine all the character defects that government purported to verify for your protection!

ian parkinson
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ian parkinson

I think competition on regulatory standards is a wonderful idea. Introducing competition shouldn’t create a race to the bottom as most people don’t want to live at the bottom. It does enforce reasonableness though.

So can the UK choose not just unilateral free trade, but also unilateral recognition of product standards in EU, US, Canada, Australia, etc – label the goods and let people choose.

Erik Bloodaxe
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Erik Bloodaxe

Ian, yes, that should be our offer to the EU. No tariffs on your goods, recognition of your standards, now please reciprocate or we’ll keep our £43Bn and you can build your own wall in your part of Ireland, because we won’t be needing one.

Rhoda Klapp
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Rhoda Klapp

Far be it from me to use economist ideation but isn’t this at base ( apart from guild exclusion and fee harvesting) an information problem? Anybody should be allowed to practice non-professional trades. They all need only to be registered on a website of traders which allows reviews by customers. This doesn’t preclude qualifications, if held, which would together with the reviews indicate the limits of pricing.

Mr Ecks
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Mr Ecks

With the one –temporary–exception of doctors all Occ licensing needs to be abolished on masse.

The medical hacks need to have their props kicked away gradually. No more control over where you trained–only rigorous exams to prove competency might be a start.

Erik Bloodaxe
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Erik Bloodaxe

What about pilots, air traffic controllers, etc? Situations where shared understanding of protocols is essential to maintain safety of third parties.